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Precontractual Investigation and Sequential Screening

  • Terstiege, Stefan
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    Should contract design induce an agent to conduct a precontractual investigation even though, in any case, the agent will become fully informed after the signing of the contract? This paper shows that imperfect investigations might be encouraged. The result stands in contrast to previous studies, which focus on perfect investigations. The contrast exists because if precontractual investigation is perfect, the benefits of sequential screening vanish.

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    File URL: https://epub.ub.uni-muenchen.de/17334/1/429.pdf
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    Paper provided by Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich in its series Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems with number 429.

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    Date of creation: 22 Oct 2013
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    Handle: RePEc:trf:wpaper:429
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    1. Craswell, Richard, 1988. "Precontractual Investigation as an Optimal Precaution Problem," The Journal of Legal Studies, University of Chicago Press, vol. 17(2), pages 401-36, June.
    2. Marco Battaglini, 2003. "Long-Term Contracting with Markovian Consumers," Theory workshop papers 505798000000000048, UCLA Department of Economics.
    3. Roger B. Myerson, 1984. "Multistage Games with Communication," Discussion Papers 590, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    4. Crémer, Jacques & Khalil, Fahad, 1991. "Gathering Information before Signing a Contract," IDEI Working Papers 5, Institut d'Économie Industrielle (IDEI), Toulouse.
    5. Cremer, Jacques & Khalil, Fahad & Rochet, Jean-Charles, 1998. "Contracts and Productive Information Gathering," Games and Economic Behavior, Elsevier, vol. 25(2), pages 174-193, November.
    6. Fuente,Angel de la, 2000. "Mathematical Methods and Models for Economists," Cambridge Books, Cambridge University Press, number 9780521585293, June.
    7. Krähmer, Daniel & Strausz, Roland, 2011. "The Benefits of Sequential Screening," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 363, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    8. Dirk Bergemann & Martin Pesendorfer, 2001. "Information Structures in Optimal Auctions," Cowles Foundation Discussion Papers 1323, Cowles Foundation for Research in Economics, Yale University.
    9. Daniel Krähmer & Roland Strausz, 2011. "Optimal Procurement Contracts with Pre-Project Planning," Review of Economic Studies, Oxford University Press, vol. 78(3), pages 1015-1041.
    10. Marco Battaglini & Rohit Lamba, 2012. "Optimal Dynamic Contracting," Working Papers 1431, Princeton University, Department of Economics, Econometric Research Program..
    11. Anke Kessler, 1998. "The Value of Ignorance," RAND Journal of Economics, The RAND Corporation, vol. 29(2), pages 339-354, Summer.
    12. Lewis, Tracy R & Sappington, David E M, 1997. "Information Management in Incentive Problems," Journal of Political Economy, University of Chicago Press, vol. 105(4), pages 796-821, August.
    13. Ralph Boleslavsky & Maher Said, 2011. "Progressive Screening: Long-Term Contracting with a Privately Known Stochastic Process," Working Papers 2011-5, University of Miami, Department of Economics.
    14. Dezso Szalay, 2006. "Contracts with Endogenous Information," The Warwick Economics Research Paper Series (TWERPS) 780, University of Warwick, Department of Economics.
    15. Alex Gershkov, 2009. "Optimal auctions and information disclosure," Review of Economic Design, Springer;Society for Economic Design, vol. 13(4), pages 335-344, December.
    16. Terstiege, Stefan, 2012. "Endogenous information and stochastic contracts," Games and Economic Behavior, Elsevier, vol. 76(2), pages 535-547.
    17. Shi, Xianwen, 2012. "Optimal auctions with information acquisition," Games and Economic Behavior, Elsevier, vol. 74(2), pages 666-686.
    18. Olivier Compte & Philippe Jehiel, 2008. "Gathering Information before signing a contract: A screening perspective," Post-Print halshs-00754311, HAL.
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